The Strategist

New possible Dieselgate brought down Renault's quotes

01/13/2017 - 14:43

On Friday, 13 January, Renault’s quotes fell down 6%. France Press reported that the French regulators are launching a preliminary investigation into possible underestimation of emissions in the concern’s diesel cars. According to the agency’s source, the investigation began on January 12, led by three forensic investigators.

Exactly one year ago, AFP’s message also provoked 25% slump of Renault's capitalization down to 21.1 billion euros. The agency, with reference to Renault union’s employee, reported that The Directorate General for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF) of the Ministry of Economy of France visited several Renault factories to check emission control system in the vehicles. The market regarded this as a continuation of the "Dieselgate" scandal with Volkswagen and other automakers.

Later, Renault announced that searches in Renault revealed no software that would have distorted the emissions analysis. The problem, in the company’s opinion, lay in an error with motor settings.

This week, the US Department of Justice indicted six Volkswagen executives, three of whom are still working in the company. The charges are brought on results of the "Dieselgate" investigation. On Wednesday, Volkswagen officially confirmed that amicable settlement project has been agreed with US regulators. The company is willing to pay $ 4.3 billion and plans to plead guilty to criminal fraud. Given amount of the fine, settlement costs for Volkswagen will exceed 18.2 billion euros ($ 19.2 billion), which the company has reserved for this purpose.

Earlier, another US watchdog, the Environmental Protection Agency (EPA), suspected that Fiat Chrysler (FCA) deliberately understated emissions of more than 100,000 diesel cars sold in the United States. The company is now facing up to $ 4.6 billion in fines. Once the news was released, FCA’s quotes in New York fell by 18%. The carmaker stated that emissions performance of its vehicles meet the standards.

A year ago, the French authorities did not hide their intentions to test cars of different companies for compliance with environmental standards after burst of the "Dieselgate" scandal with Volkswagen. Obviously, news of the searches has been regarded as proof of Renault’s guilt. The company itself hastened to report that it did not use any "malicious" software. 19 January 2016, Renault announced recall of 15 000 bestsellers - subcompact crossover Captur - just to troubleshoot engine settings.

Renault then pointed out that it is difficult to lay a claim in this situation since the company has not technically violated homologation procedures for diesel engines. According to European law, it should be conducted in a laboratory on a bench rather than directly on road. French officials, on the other hand, checked the cars under actual usage conditions. 

Occasional scandals are a usual thing for the global automotive industry. In addition to Volkswagen, Toyota and GM have also been caught on concealment of defects. Renault, in turn, had stayed aside the scandals until 2016. 

Impact of the scandal’s possible consequences may be one of the greatest. After all, France accounts for 21.7% of Renault’s global sales, and the share for Europe as a whole reaches 57%. Among other things, this is a shot at the future. Now Renault is positioned as a pioneer (at least in Europe) in electric car making. Every fifth buyer of electric vehicles in Europe chose its model Zoe in 2015. Obviously, the company will lose quite enough customers fairly, if the authorities prove its fault.